Intrawest: Avoid Potential Storms Surrounding The SNOW IPO

Jan.29.14 | About: Intrawest Resorts (SNOW)

IPO Offering

Intrawest Resorts Holdings Inc (NYSE:SNOW), a North American resort and vacation firm with principal offices in Denver, Colorado, plans to raise $250 million in its upcoming IPO. The firm will offer 15.6 million shares, including 80% insider shares, at an expected price range of $15-$17 per share. If the IPO can find the midpoint of the range at $16 per share, SNOW will command a market value of $729 million.

SNOW filed on November 12, 2013.

Lead Underwriters: BofA Merrill Lynch, Credit Suisse Securities LLC, Deutsche Bank Securities Inc., Goldman Sachs & Co.

Underwriters: JMP Securities LLC, KeyBanc Capital Markets Inc., Stephens Inc.

Business Summary

Intrawest Resort is a North American mountain resort and adventure company, holding interests in seven mountain resorts spread across the continent's major ski regions. These resorts include over 11,000 skiable acres and over 1,150 acres of land available for real estate development. The firm's resorts received over six million visitors from more than 100 countries during FY 2013.

SNOW operates an adventure travel business, centered on its Canadian Mountain Holidays firm, a heli-skiing adventure company that provides access to skiing and hiking to more skiable terrain than all lift accessed resorts in North America combined. The firm also operates a real estate firm that manages, markets and sells vacation club properties, condominium hotel properties, and residential real estate.

Valuation

SNOW offers the following figures in its S-1 balance sheet for the three months ending September 30, 2013:

Revenue: $80,561,000.00

Net Loss: ($121,578,000.00)

Total Assets: $1,132,357,000.00

Total Liabilities: $2,262,998,000.00

Stockholders' Equity: ($1,130,311,000.00)

SNOW generated revenues of $524.4 million and $80.6 million in FY 2013 and the three months ended September 30, 2013, respectively. A series of transactions in December 2013 allowed the firm to reduce its total long-term debt on a pro forma basis to $584.5 million from $2.0 billion as of September 30, 2013. After giving pro forma effect to these transactions, the firm's net income (loss) in FY 2013 and for the three months ended September 30, 2013 was $5.4 million and $48.9 million, respectively, as compared to huge losses of ($296.7) million and ($121.6) million on an actual basis, without giving pro forma effect to these transactions.

Regional Competitors

SNOW's resorts primarily compete with similar, nearby resorts, including Breckenridge Ski Resort and Park City Mountain Resort; Winter Park competes with Copper Mountain Resort and Keystone Resort; Stratton competes with Okemo, Mount Snow, and Killington Resort.

Management

William A. Jensen has served as SNOW's CEO since June 2008. Mr. Jensen previously served as CEO of Whistler Holdings and as President of the Mountain Division at Vail Resorts, Inc. He also served as the President of Fiberboard Resort Group, where he oversaw the executive management of three ski resorts in California, Northstar at Tahoe, Sierra at Tahoe and Bear Mountain.

Conclusion

We plan to avoid this offering and believe that growth oriented investors should stay away from this IPO.

While SNOW's recent moves have put it on significantly better financial footing, its recent history of losses is deeply concerning.

SNOW is involved in multiple industries that all depend on a strong economy: real estate, adventure vacationing, and resort operation.

While the improving economy is certainly a positive sign for SNOW, any downturn could leave the firm back in dire straights. Even if the economy is in excellent condition, the firm's resorts remain at risk for problems, caused by forces of nature; e.g. a year of low snowfall could lead to poor results for a season.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.